4 Neither party exercised their right to apply for a re-hearing and the award took effect as a judgment of the District Court on or about 31 December 1997. The respondent's third party insurer paid the judgment debt to the appellant's solicitors on 8 February 1998, and on 15 May the solicitors agreed to assess the then plaintiff 's costs at $12,500. Soon afterwards the insurer commenced proceedings in the name of the former defendant against the appellant under s 66 of the Motor Accidents Act seeking repayment of the judgment debt and avoidance of its liability for the costs of the first action. The section provides:
"66 Remedy Available Where Claim Fraudulent
(1) This section applies to a claimant if it is established that, for the purposes of obtaining a financial benefit, the claimant did or omitted to do anything (including the making of a statement) concerning a motor accident or any claim relating to a motor accident with knowledge that the doing of the thing or the omission to do the thing was false or misleading.
(2) If this section applies to a claimant:
(a) a person who has a liability in respect of a payment, settlement, compromise or judgment relating to the claim is relieved from that liability to the extent of the financial benefit so obtained by the claimant, and
(b) a person who has paid an amount to the claimant in connection with a claim (whether under a settlement, compromise or judgment, or otherwise) is entitled to recover from the claimant the amount of the financial benefit so obtained by the claimant and any costs incurred in connection with the claims". (emphasis supplied)
5 Under the general law a party who claims that an adverse judgment was procured by the fraud of his adversary can bring an action to set aside that judgment. Such proceedings are equitable in origin and nature (Wentworth v Rogers [No 5] (1986) 6 NSWLR 534, 538) and in fact are proceedings for the judicial rescission of the judgment (Boswell v Coakes (No 2) (1894) 6 R 167 HL, 169). Such proceedings, when successful, do not result in "the scandal of conflicting decisions" (Rogers v R (1994) 181 CLR 251, 273, Spencer Bower, Turner and Handley, "Res Judicata", p 50) because if the second action succeeds the first judgment is set aside.
6 Section 66 however allows a defendant to obtain restitution of benefits paid under a judgment without the need for that judgment to be set aside or varied.
7 Mr Mark Williams SC, who appeared for the appellant, submitted that the new action was barred by the extended res judicata doctrine applied in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589. The insurer, who conducted the proceedings on behalf of the defendant in the first action, knew that the plaintiff had not told the whole truth to the doctors who examined him for medico-legal purposes. The plaintiff had been subject to surveillance and was seen working on a building construction site on Wednesday 23, Tuesday 29 and Wednesday 30 April 1997, although further surveillance in August and September had not revealed any employment during that period.
8 The plaintiff 's evidence-in-chief before the arbitrator was that his back injury continued to give him pain which was aggravated by activities such as driving or mowing the lawn. When questioned about his capacity for work he said he'd tried working on a building site, but had to give up after one to three hours. He said lifting was bad, that he no longer played sport, his back was getting worse and he could not bend or lift. He was then shown the video film of his work activities on the days referred to. The arbitrator said: "It exhibited the plaintiff performing a variety of activities. I could see no discomfort or aggravation in the activities he undertook, albeit for a limited time". The plaintiff was examined by Dr Mathieson on 1 May, having worked on a building site the previous day, and told the doctor he had not worked since the accident. He told Dr Maniam on 3 July that he was willing to work provided he could avoid heavy lifting and repetitive spinal movements, but he did not tell the doctor he was capable of such activities.
9 The arbitrator in his reasons said:
"The video shows him undertaking a full range of activities including climbing, lifting and bending. Notwithstanding that I have formed a view that the plaintiff did suffer neck and back injuries arising out of the accident … I believe in his evidence and in his attendances on both the plaintiff 's and defendant's doctors the plaintiff exaggerated the degree of discomfort and level of pain he has suffered and I take that into account in dealing with the award".
10 The insurer therefore established in the arbitration that the plaintiff knowingly made false or misleading statements to the doctors and in much of his evidence, but he nevertheless secured an award of $29,397.50.
11 Mr Williams submitted that the issue of the plaintiff 's fraud had been litigated before the arbitrator and was the subject of an issue estoppel. Moreover he submitted the insurer had acted unreasonably in bringing an action under s 66 to re-litigate the issue of fraud in new proceedings when it could and should have re-litigated that issue on a re-hearing of the original proceedings before a Judge. In the result there were now two inconsistent judgments of the District Court in proceedings between the same parties arising out of the same facts, the very thing that the Anshun principle was intended to prevent. Accordingly he submitted the new proceedings were either barred by an issue estoppel or by an Anshun estoppel.
12 Mr Williams' submissions were based on the general law but the starting point in this case has to be s 66. If there is any inconsistency, the section must prevail.
13 Plaintiffs bringing proceedings under s 66 must prove (where statements are relied on) that the defendant made statements for the purpose of obtaining a financial benefit and with knowledge that they were false or misleading. The then defendant established before the arbitrator that the then plaintiff had knowingly made false or misleading statements for the purpose of obtaining financial benefits, but the then plaintiff did not benefit from the fraud that was then exposed because the arbitrator allowed for it in making his award.
14 The references in s 66 (2)(a) and (b) to "the financial benefit so obtained" require proof of a causal link between the false or misleading statement and the obtaining of the benefit. The causal link is that required under the general law to establish fraud, namely proof of inducement, that is that the representee accepted the representation as true and acted on that belief to his detriment.
15 It must be established that the representee was deceived when he acted on the fraudulent misrepresentation. Knowledge of the truth at the relevant time would be an answer to an action under s 66. The relevant principles are summarised in Spencer Bower, Turner and Handley "Actionable Misrepresentation" 4th ed at pp 116-7:
"A representee who knows or discovers the truth in time is not deceived. Such knowledge is a good answer to any form of proceeding based on the misrepresentation. A representee cannot be misled by a statement which he knew to be false. … It is sufficient that the facts became known to the representee from whatever source before he altered his position; … a representation normally continues during the interval between its communication and any alteration of position under its inducement. … The representee's knowledge of the truth must be full and complete. Partial and fragmentary information, or mere suspicion will not do; 'suspicion, doubt and mistrust do not have the same consequence as knowledge'."
16 The Judge's findings establish that the insurer did not have "full and complete" knowledge of the original plaintiff 's fraud before the receipt of Mr Morters' report on 20 April 1998. The insurer certainly had "suspicion, doubt and mistrust", but that is not enough.
17 Mr Morters reported that Mr Toubia had worked as a builders' labourer substantially on a full time basis for at least 6 months from November 1996 until the beginning of May 1997. He had done so under an assumed name.
18 The Judge found that Mr Toubia had worked full time during this period. He also found that the insurer had no knowledge of this, or of the identity of Mr Toubia's employer, until it received Mr Morters' report. It is evident that the arbitrator had no such knowledge either. Mr Williams referred to the Judge's criticisms of some of the evidence of Mr Toubia's employer, and challenged these findings, but they cannot be disturbed.
19 He further submitted that the insurer had acted unreasonably and carelessly in failing to take effective action at a much earlier stage to discover the truth. It suspected that Mr Toubia had worked for longer than the few days proved in the arbitration, but although it had instructed Mr Morters on 20 November 1997, he only started work on this case on 31 March 1998. He was then able to discover the truth quickly and without undue difficulty. All this showed that the insurer could have discovered the full extent of the fraud prior to the award taking effect as a judgment and the judgment debt being paid.
20 Mr Williams submitted that the insurer knew after the arbitration that Mr Toubia had attempted to defraud it and this knowledge was sufficient to bar it from relief under s 66. However the insurer's knowledge at the relevant times was incomplete and the then plaintiff obtained no financial benefit from the fraud that was exposed at the arbitration. The financial benefits he did obtain were obtained from the fraud that was not then exposed. These conclusions answer this submission, but the decision in Gipps v Gipps [1978] 1 NSWLR 454 provides a further answer. This Court there held that a representee who knows that the representation was false to some extent, but acts on it nevertheless, may still establish inducement if the true extent of the misrepresentation was significantly greater than expected.
21 A further argument for the appellant was that the action under s 66 was vexatious or oppressive and should have been dismissed as an abuse of process. This is a difficult submission for a party who has obtained a judgment in his favour by a fraud on the defendant and the Court, and I see no basis for a finding of abuse. The appellant incurred substantial costs in defending these proceedings but would have incurred similar costs if the respondent had sought a re-hearing of the original action before a Judge. The insurer had a choice of remedies and was entitled to wait until it had obtained clear evidence of the fraud, and to avoid incurring further legal costs until it had done so.
22 Mr Williams submitted that s 66 incorporated the requirement under the general law that a party seeking to set aside a judgment for fraud must establish that fresh facts had been discovered since the judgment which could not have been discovered earlier by the exercise of reasonable diligence. The short answer is that the section does not impose any such requirement. The longer answer is that proof of due diligence was not required under the general law in such a case.
23 The judgment of this Court in Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 contains a summary of the principles which govern an action of this nature, and refers to the relevant authorities with no suggestion of any requirement of due diligence. However some support for that proposition can be found in dicta in Owens Bank Ltd v Bracco [1992] 2 AC 443, and in Owens Bank Ltd v Etoile Commerciale SA [1995] 1 WLR 44 PC.
24 Both cases involved proceedings to enforce a foreign judgment where the fact that the judgment was obtained by fraud, without more, is a defence. In Owens Bank Ltd v Bracco [1992] 2 AC 443 at 459-60, Parker LJ, delivering the judgment of the Court of Appeal, said:
"Our law had long permitted the party against whom an English judgment had been given to bring an independent action to set aside the judgment on the ground that it had been obtained by fraud, but strict limits were imposed … In particular the Court would not permit the new action to proceed unless the plaintiff would put forward fresh evidence, discovered since the first trial, being evidence which could not have been produced then with reasonable diligence, and which is such that, if it had been put forward at the trial, it would in probability have caused a different conclusion to be reached: see Dicey and Morris 'The Conflict of Laws' 11th ed vol 1 page 467 citing Boswell v Coakes (No 2) (1894) 86 LT 365 n".
25 Lord Bridge in the House of Lords said at 483:
"… the common law rule [is] that the unsuccessful party who has been sued to judgment is not permitted to challenge that judgment on the ground that it was obtained by fraud unless he is able to prove that fraud by fresh evidence which was not available to him and could not have been discovered with reasonable diligence before the judgment was delivered … this is the rule to be applied in an action brought to set aside an English judgment on the ground that it was obtained by fraud … Your Lordships were taken … through the many authorities in which this salutary English rule has been developed and applied and which demonstrate the stringency of the criterion which fresh evidence must satisfy if it is to be admissible to impeach a judgment on the ground of fraud. I do not find it necessary to examine these authorities. The rule they establish is unquestionable and the principle upon which they rest is clear. The question at issue in this appeal is whether a defendant who is seeking to resist the enforcement against him of a foreign judgment … is placed in the same position as if he were a plaintiff in an action seeking to set aside the judgment of an English court on the ground that it was obtained by fraud … ".
26 In Owens Bank Ltd v Etoile Commerciale SA [1995] 1 WLR 44 at 48, Lord Templeman said:
"An English judgment is impeachable in an English court on the ground that the first judgment was obtained by fraud but only by the production and establishment of evidence duly discovered since the trial and not reasonably discoverable before the trial: see Boswell v Coakes (No 2) (1894) 86 LT 365 n".
27 Both Parker LJ and Lord Templeman relied on the decision of the House of Lords in Boswell v Coakes (No 2), but as will be seen it provides no support for the proposition that proof of due diligence is required in an action to set aside a domestic judgment. That case is reported in (1894) 6 R 167 and as a note to Birch v Birch in (1902) 86 LT at 365. A submission that due diligence had to be shown was part of the argument of junior counsel for the successful appellant in Birch v Birch. His argument is reported both at (1902) 86 LT at 365 and at [1902] P 130 at 134-5 but, as will be seen, this submission was not accepted by the Court of Appeal.
28 The dicta of Lord Bridge in Owens Bank Ltd v Bracco (quoted above) were cited by the Federal Court in Monroe Schnieder Associates (Inc) v No. 1 Raberem Pty Ltd (No 2) (1992) 37 FCR 234, 240-1. The Court continued at 241:
"These remarks were delivered obiter, with a view to contrasting the law as regards the impeachment of domestic judgments, with the lesser degree of finality which the common law accorded foreign judgments when actions were brought upon them in a domestic court … It is not disputed on the present appeal that the law in Australia is to the same effect as that described by Lord Bridge. The stringent principles established by the authorities to confine the jurisdiction have been summarised by Gordon QC at 376-377 as setting the following requirements:
'(a) Evidence newly discovered since the trial;
(b) Evidence that could not have been found by the time of the trial by exercise of reasonable diligence;
(c) Evidence so material that its production at the trial would probably have affected the outcome; and when the fraud charged consists of perjury, then;
(d) The evidence must be so strong that it would reasonably be expected to be decisive at a re-hearing, and if unanswered must have that result'."
29 The article by Gordon QC referred to was "Fraud or New Evidence as Grounds for Actions to Set Aside Judgments", which appeared in (1961) 77 LQR 358, and 533.
30 These remarks of the Federal Court were also obiter because the Court held that the substance of the new evidence relied upon in this case was "well known to the appellants' solicitors prior to the commencement of the trial" and was therefore not "fresh" (243), and that "the evidence … relating to the alleged fraud by perjury was incapable of showing … that the alleged fraud had occurred, or was directly material to, or had probably affected the result of the trial". (244)
31 The dicta of Lord Bridge in Owens Bank Ltd v Bracco were cited again by the Federal Court in Bourke v Beneficial Finance Corporation Ltd (1993) 124 ALR 716 at 724-5 in appeals from sequestration orders. The appellants sought, on the ground of fraud, to go behind a judgment of the Federal Court which had rejected their claims under the Trade Practices Act which if established would have been available as a set-off against the debts of the petitioning creditor. The Court said at 724:
"… a classic example of the circumstances in which a court will go behind a judgment is where the judgment has been obtained by fraud. The fraud must be proved by fresh evidence which was not available and could not have been discovered with reasonable diligence before the judgment was delivered. We refer to the judgment of this Court in Monroe Schnieder Associates (Inc) v No. 1 Raberem Pty Ltd (No 2) (1992) 37 FCR 234 …".
32 The Court cited the dicta of Lord Bridge in Owens Bank Ltd v Bracco at 724-5 and added:
"The passages cited from Lord Bridge's speech in Owens Bank were referred to by this Court in Monroe Schnieder. The Court said (at FCR 241) that his Lordship's remarks were obiter, but added that it was not disputed that the law relating to Australian judgments was to the same effect as that described by Lord Bridge".
33 The comments of the Federal Court in Bourke's case were obiter because the Court was not dealing with an application to set aside a judgment for fraud. It considered and rejected on its merits the claim that the judgment had been obtained by perjury or fraud although fresh evidence had not been discovered since the trial (727-30). The decision of Nicholson J in Yap Cheng See v Granich and Associates, 28 June 2001 unreported [2001] FCA 799, takes the matter no further.
34 The decision of the House of Lords in Boswell v Coakes (No 2) provides no support for any requirement of due diligence in an action to set aside a domestic judgment for fraud. Lord Selborne said (6 R at 174):
"Was or was not it a matter proper to be gone into upon the present motion? That seems to me to be the only question which ultimately arises; and in my judgment it was most material to that question, which beyond all doubt ought to have been gone into upon this motion, namely whether anything material to disturb (if proved) the judgment of this House had been newly discovered by the plaintiff. That involves a double proposition; first that something has been newly discovered, which is all they have attempted to prove, and then that that something is material. And there is a total defect both of allegation and of evidence of that which alone could make it material. That seems to me to be a matter … for the purposes of justice, most necessary, to be gone into".
35 The judgments in Birch v Birch provide no support for such a requirement either. Cozens-Hardy LJ said ([1902] P at 138):
"The judgments of the Court of Appeal and of the House of Lords in Boswell v Coakes contain some important observations as to the mode in which a motion such as that which is now before us ought to be dealt with. Lord Selborne points out that it is not sufficient for the plaintiff to allege fraud. It is the duty of the court to receive such evidence, pro and con, as is material to the question whether there really has been, since the former judgment, a new discovery of something material to disturb the former judgment".
36 See also per Vaughan Williams LJ at 136.
37 I would not follow the dicta in Owens Bank Ltd v Bracco, Owens Bank Ltd v Etoile Commerciale SA, and the Federal Court even if there was no High Court decision on the point because, with respect, the dicta are contrary to principle and earlier authority. The assumption is that the Court and the losing party were successfully imposed on by the fraud of the successful party, but relief should nevertheless be denied and the judgment allowed to stand because the defrauded party was careless or lacked diligence in the preparation of his case. Such a result would be contrary to long established and fundamental principles. Contributory negligence is not a defence to an action for fraud whether the relief claimed is rescission or damages. As Brennan J said in Gould v Vaggelas (1985) 157 CLR 215, 252:
"A knave does not escape liability because he is dealing with a fool".
38 Means of knowledge of the falsity of the representation without actual knowledge is no defence and a representee has no duty to make enquiries to ascertain the truth. Spencer Bower, Turner and Handley "Actionable Misrepresentation" states the relevant principles at pp 118-9:
"It does not matter what steps the representee took if he did not ascertain the truth … a man who has told an untruth … cannot complain that the representee acted on the faith of his misstatement in the manner in which he, the representor, intended that he should. He can never be heard to say that another should not have believed the lie that he was told for the purpose of inspiring that belief, or plead that if the representee had not been such a fool, no harm would have been done. The representee never owed any duty to the representor to be careful, to be active in suspicion, or diligent in research when it was the very purpose of the representation to put his mind at rest".
39 The dicta in the recent English cases are contrary to earlier decisions of the Privy Council and House of Lords which were not cited in those cases. In Hip Foong Hong v H Neotia & Co [1918] AC 888, 894 (Hip Foong), Lord Buckmaster said:
"If no charge of fraud or surprise is brought forward, it is not sufficient to show that there was further evidence that could have been adduced to support the claim of the losing party; the applicant must go further and show that the evidence was of such a character that it would, so far as can be foreseen, have formed a determining factor in the result. Such considerations do not apply to questions of surprise and still less to questions of fraud. A judgment that is tainted and affected by fraudulent conduct is tainted throughout, and the whole must fail".
40 In Jonesco v Beard [1930] AC 298, 301-2, Lord Buckmaster said:
"The fraud charged related to the claim for the price of the two horses alleged to have been sold to the appellant. Were such fraud properly established I agree with the Court of Appeal in holding that the whole judgment would thereby have been vitiated. Fraud is an insidious disease, and if clearly proved to have been used so that it might deceive the Court, it spreads to and infects the whole body of the judgment".
41 In an action for fraud, a plaintiff must prove that he was deceived but need not prove that he was diligent. Where the action seeks the judicial rescission of a judgment, the plaintiff must prove that he and the Court were deceived and he can only do this by showing that he has discovered the truth since the trial. Where this is done, and the fresh facts are material, fraud is established. Lord Buckmaster said that if fraud was proved the judgment was vitiated, and he can only have meant that nothing else had to be proved apart from fraud. This means there is no need to prove due diligence as well.
42 However the issue is foreclosed in this Court by the decision in McDonald v McDonald (1965) 113 CLR 529. At 532-3 Barwick CJ, whose judgment was concurred in by Kitto J, considered the requirement for granting a new trial on the ground of discovery of fresh evidence. It is essential in such a case that the appellant establish that the fresh evidence could not have been discovered by the exercise of due diligence before the trial. He continued at 533:
"But if the fresh evidence does not satisfy all these requirements so that a new trial could not be ordered on the basis of the discovery of fresh evidence, but does tend to establish that the verdict was obtained by fraud, … the court may grant a new trial … if the court itself, on a trial of such issues, finds the fact of the fraud … to be proved to its reasonable satisfaction: Hip Foong …; Jonesco v Beard … It is not necessary in that event that the evidence of the fraud … though it should be fresh, should be evidence which would be admissible on the issues between the parties in the action, or that it should be found to be probably conclusive of those issues. The court's conclusion upon the fresh evidence before it that the verdict was obtained by fraud … is sufficient to justify setting aside the verdict and ordering a new trial".
43 Menzies J referred to Hip Foong at 540, 541, and at 542 said:
"… if a new trial is sought upon the ground of the discovery of fresh evidence which, if believed, would show that a fraudulent case has been presented to the court at the original trial, and if it is also shown that this evidence was not available at the original trial notwithstanding the exercise of reasonable diligence, then a new trial will be ordered if the case made out is such as to satisfy the court that in the interests of justice the matter in question should be tried afresh. This proposition which relates only to the granting of a new trial on the ground of the discovery of fresh evidence, leaves untouched the rule that, if by any means it be affirmatively proved that the earlier judgment was tainted by fraud, it will, without more, be set aside".
44 Taylor J also referred to Hip Foong at 535 and drew the same distinction.
45 At 542-3 Menzies J referred to the article by D M Gordon QC in (1961) 7 LQR 358, 533 in which the author suggested that in an action to set aside a judgment for fraud the plaintiff had to prove that evidence of the newly discovered facts could not have been obtained before the first trial by the exercise of reasonable diligence. He rejected this view because the author had not referred, inter alia, to the decision in Hip Foong. In Nicholls v Carpenter [1974] 1 NSWLR 369 this Court refused to order a new trial on the ground of discovery of fresh evidence because the requirement of due diligence was not satisfied, but on the same evidence it set aside the judgment on the ground that it had been obtained by fraud. The ratio decidendi of this considered decision is contrary to the obiter dicta relied on by the appellant.
46 The remaining questions on liability concern his Honour's findings that the financial benefits "so obtained" by the appellant within the meaning of s 66 (2)(b) included the amounts of $9,500 and $10,000 awarded by the arbitrator for non-economic loss and future economic loss. These findings were challenged by the appellant but are clearly correct and cannot be disturbed. All attacks on the judgment of Phegan DCJ have therefore failed and the appeal should be dismissed with costs.
47 Although I have prepared reasons of my own, I must acknowledge the assistance I have obtained from the clear and careful judgment of the trial Judge on the questions he was asked to consider. There were other questions of fact and law which he had to determine as well and his decision in these respects was not challenged by either party in this Court.